New Sanctions Target Iran’s Oil-for-Terror Network

September 5, 2019 | Policy Brief

New Sanctions Target Iran’s Oil-for-Terror Network

The Treasury Department took action Wednesday against a global network that exports Iranian oil for the benefit of the Islamic Revolutionary Guard Corps (IRGC), a U.S.-designated foreign terrorist organization. The Trump administration has moved aggressively since April to block Iran’s petroleum exports, a campaign it now seeks to reinforce by exposing the ties between the oil sector and Iran’s terrorist infrastructure.

The U.S. began to emphasize the linkage between oil exports and Iranian terrorism last month, when the Department of Justice issued a warrant for the seizure of the Adrian Darya 1, an Iranian tanker that British authorities temporarily detained en route to Syria. In a forfeiture complaint tied to the warrant, the department laid out the intricate web of connections between the IRGC and an array of front companies in Singapore, the United Arab Emirates, and the Caribbean, whose role was to facilitate Iranian oil exports, including the cargo of the Adrian Darya 1.

In its announcement of Wednesday’s sanctions, Treasury included substantial new information about precisely how the IRGC manages Tehran’s oil exports. The key figure in the Iranian network is former Minister of Petroleum Rostam Qasemi, who is now a senior official in the IRGC Quds Force, its foreign operations branch. Qasemi oversees a “sprawling network, which features dozens of ship managers, vessels and facilitators,” including his son, Morteza Qasemi. The Quds Force “also relies heavily on Hezbollah officials and front companies to broker associated contacts.” The Obama administration initially sanctioned Qasemi in 2010 for other IRGC-related activities.

As part of Wednesday’s action, Treasury added nine individuals, 16 entities, and six vessels to its Specially Designated Nationals list, an inventory of those under U.S. sanctions. The new entities on the list include companies based in Lebanon, Syria, Iran, India, and Singapore.

The premier destination for the IRGC’s oil is Syria. According to Treasury, the Quds Force network exported nearly 10 million barrels of crude oil “predominantly to the Syrian regime” as well as nearly 4 million barrels of condensate, another liquid hydrocarbon. The combined value of these exports was roughly $750 million. The connection between these exports and the regime of Bashar al-Assad underscores the degree to which putting pressure on Assad serves not just a humanitarian purpose, but also disrupts the funding of Iranian terrorism.

Treasury’s action aims a much-needed blow at Tehran’s exports to Syria, which reached 158,000 barrels per day in August, according to Tanker Trackers. While Iran’s overall exports are down sharply, shipments to Syria have reached unprecedented levels since Washington’s implementation of its zero exports policy, which drove legitimate buyers out of the marketplace.

What remains unclear is who is buying the oil delivered to Syria. Treasury’s carefully worded statement does not identify the Assad regime or any other party as the buyer, although it asserts clearly that the oil was sold. While Assad is dependent on Iranian imports, his regime has relied on credits from Tehran to finance its purchases. One possibility is that the regime processes the oil and pays the IRGC after selling refined products to Syrian consumers. Alternately, Assad may pay for the oil with fixed assets, akin to his transfer of phosphate mining rights to Russian firms. Alternately, the IRGC network may re-export the oil to black-market buyers abroad.

Whomever the buyer, the surest means to disrupt exports to Syria is to prevent Iranian ships from transiting the Suez Canal, an objective that requires Egypt’s cooperation. At present, Cairo does not bar sanctions violators from the Canal. The U.S. should push hard for this to change, while encouraging Egypt to block individual Iranian ships that violate maritime safety protocols.

David Adesnik is the director of research at the Foundation for Defense of Democracies (FDD), where he also contributes to FDD’s Center on Economic and Financial Power (CEFP). Follow David on Twitter @adesnik. Follow FDD on Twitter @FDD and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.